SEC distributes $ 23 million to every school to mitigate impacts of COVID-19
2020 has been a tough financial year for many colleges thanks to the COVID-19 pandemic, declining sales of tickets, merchandise, and food and beverage thanks to the limited or no number of fans allowed to play the games through to them. additional costs associated with regular and prompt COVID-19 testing. – games reorganized through general academic issues related to technology costs for distance learning and / or declining enrollment resulting from a distance-only environment. This led to some conferences like the Pac-12 proposing the use of their media rights as collateral for a shared credit facility that their schools could access, and some schools like Memphis making individual loan agreements. But it turns out the SEC went further, making a deal with Truist and Regions Bank to borrow against their future rights income from their lucrative top tier deal with ESPN which is expected to begin in 2024, and distribute that borrowed money. to member schools immediately. Here is more on that from Ross Dellenger from Illustrated sports:
The league has distributed an additional $ 23 million in revenue to each of its 14 members in an effort to help offset the financial impact of COVID-19, Commissioner Greg Sankey confirmed to Sports Illustrated in an interview this week. The league is funding the $ 322 million distribution by accessing future profits from its multi-million dollar media rights deal with ESPN that begins in 2024.
The SEC is the only conference to announce additional distribution to its schools, and the amount is significant. One-time additional income is more than half of the traditional conference income distribution for 2019-2020 ($ 45.5 million per school). And still for some programs, the amount is a small part of the income lost during the pandemic.
SEC schools lost an average of $ 45 million in revenue over the past school year, with some programs losing up to $ 70 million, Sankey says. In addition to the lost revenue – largely due to the sale of football tickets – each SEC school has spent at least $ 2 million on COVID-19 testing.
There are a few interesting elements to this. On the one hand, it is noteworthy that the conference took place and did that and distributed the money to the schools. While the Pac-12’s proposal for a shared facility that schools could have access to may seem better as “only those who need it will take it”, this seems problematic in college sports in particular; with no draft or free agency, recruiting is everything, and “don’t go to this school!” Their athletics department is in such bad shape that they needed a loan, when we didn’t ”could be a good negative recruiting argument. (And aspects of the FOI law relating to college sports reporting make it highly likely that any school’s decision will eventually be made.)
The SEC conveniently avoided these conversations by simply taking this loan for future conference fees and distributing it immediately to all schools. And all schools should have some use for it, especially since the money is not that limited. The Dellenger article notes that “these funds are expected to be used to support athletes,” but like traditional media rights distributions, schools are free to use the money as they see fit. So that’s money that schools can use where it’s needed, and every SEC school (like every school across the country) could probably use the money right now.
The other notable element is that the future of the SEC’s media rights is so established and so strong that the conference can strike a reasonable deal to borrow on the 2024 revenues. As Dellenger writes, “The league expects that its annual distribution continues to increase from 2025, even after the reallocation. ” That says a lot considering the conference payouts ($ 45.5 million per school in 2019-20) were already in the top two with the Big Ten. And that seems like a pretty logical decision for the conference; they will divert money from the 2024 rights deal in the “late 2020s” (in Sankey’s comments to Dellenger) to pay off that loan, but they will continue to give their schools payment increases at the end of the 2020s. -beyond the old offers of those years. .
In many ways, this is really a classic example of when a loan can be good. SEC schools are currently facing at least somewhat of a financial tightening of the circumstances of 2020. But their future earning potential from media rights is pretty secure, especially with this deal with ESPN; ESPN’s parent company Disney will certainly be there and be able to pay in 2024, which could be more uncertain if it were a tech startup. And having a locked-down media rights deal already is another advantage the SEC has over the Pac-12, which still has its rights to earn beyond 2023-24. Binding a new rights deal will be the key issue for new Pac-12 commissioner George Kliakoff, and much of it could give this conference similar flexibility to what the SEC has shown here; some issues with the Pac-12 loan plan stemmed from their future media rights not being locked.
So a conference-wide move like this on the part of the SEC comes at the cost of some interest and some future deductions of rights fees in exchange for getting the money now. But getting that money now puts the schools in a much stronger position. And while that slightly decreases what they’ll get over the last half of the decade, it seems worth it in return for not having to scramble now in the wake of crushing losses. It sounds like a smart move by the conference, and one that can help its schools remain a dominant athletic force, even amid budget crunches.